It will be bitterly disappointing to many farmers that the Canadian Transportation Agency chose to reject a level-of-service complaint filed by the Canola Growers of Canada over last winter’s rail service.
The Canola Growers’ level-of-service complaint was the one opportunity farmers had to extract some compensation for their losses in last winter’s debacle, even if it proved to be more symbolic than significant, given the scale of impact last winter had on their bottom line.
It was courageous of the association to step up to represent producers, taking the similar role — albeit with far fewer resources — as the former Canadian Wheat Board in these matters. However, whereas the former CWB had a relatively simple mechanism for flowing compensation back to producers through the pool accounts, it remained unclear how the Canola Growers would distribute any redress, had their claim been successful.
But that’s all moot given the CTA’s decision to reject the complaint on what some would call a technicality.
The Canola Growers’ complaint was aimed at both national railways and dealt with the overall consequences of poor rail service, which cost the system an estimated $7 billion. The CTA ruled the Canola Growers’ complaint couldn’t proceed because there wasn’t enough evidence.
Not enough evidence?
Let’s see now, farmers’ grain was stuck on the farm, while dozens of ships were lined up charging demurrage at port. At the peak of the crisis, the railways were behind by more than 70,000 rail car orders.
Country basis levels were punishingly wide, although some debated whether that mattered if farmers weren’t selling anything. Grain handlers pass their costs back to farmers, so you could argue it will be farmers, and farmers alone, footing the bill for failed railway performance.
But these costs are intangible to an entity such as the CTA, which rejected the Canola Growers’ complaint because it failed to link the allegations of poor service to specific railway service breaches.
As a case in point, the CTA ruled in favour of a complaint against CN by Louis Dreyfus Commodities Canada Ltd., that the railway had failed to supply it with the number of rail cars it had contracted. The agency rejected CN’s justifications for the service failures and reportedly made some pointed remarks about how CN manages its fleet capacity to be the smallest possible in order to maximize revenue from hauling grain under the revenue cap.
As well, it acknowledged that with so many captive shippers there is no incentive for the railways to invest in capacity because they face no threat of losing business.
“In a monopoly situation, the railway company does not receive the same signals it would in a competitive environment,” the decision states. “The opportunity costs to the shippers of unfilled orders do not affect the railway company’s revenues and the costs of demurrage for vessels awaiting shipments are borne by shippers alone.”
In short, the CTA gets it. But as evidenced by how it handled the Canola Growers’ complaint, the regulatory system, as it is presently structured, doesn’t allow for the farmers’ voice to be heard. That’s a problem that the federal government has failed to address in any of its response to date.
In fact, it would seem the federal government is backing away from its ‘get tough with the railways’ rhetoric of last winter. Consider the subtle, but significant, change in how those $100,000 penalties are assessed if the railways fail to meet their weekly targets.
Despite their repeated use of the words $100,000 per week in press releases and statements last winter, the wording now reads $100,000 per violation. Officially, no one will confirm or deny conjecture that that means those fines will be imposed per week, which if is the case, places their effectiveness somewhere in the vicinity of that toothless six-year-old singing the “All I Want for Christmas” song to Santa.
Larry Weber of Weber Commodities Ltd., has a hunch this has something to do with lots of lobbying by the railways. We agree. In a recent blog post, he ran a four-page long list of railway lobbying meetings with federal officials gleaned from the Office of the Commissioner of Lobbying database. It includes 16 meetings between CN and the federal transportation minister.
Which brings us to the question of what farmers need to do. We’re encouraged by the unified voice that is emerging from the farm organizations on the need for policy change. There is no longer one organization that can do it alone.
But in the meantime, we would suggest there needs to be a concerted effort at developing a mechanism to document and quantify the costs incurred by farmers — in a language the regulatory system understands.